Oil prices climbed above $50 per barrel on Wednesday, supported by rising stock markets and expectations that the U.S. economic slowdown may be less brutal than initially thought.
Investors shrugged off a bearish industry report on Tuesday showing a large build in U.S. crude stocks and instead looked ahead to figures due later from the U.S. Energy Information Administration and to economic data and equities for direction.
The gradual global spread of swine flu, with the first U.S. death confirmed from the H1N1 strain, also failed to dent the oil market. By 1226 GMT (8:26 a.m. EDT), U.S. crude oil for June delivery was up 65 cents per barrel at $50.57, having hit a high of $50.96. Earlier the contract lost as much 80 cents.
London Brent crude was up 60 cents at $50.59 a barrel.
We have had a high correlation between stock markets and oil over the last few weeks and when equities go up, so do oil and other commodities, said Frank Schallenberger, head of commodities research at Landesbank in Stuttgart.
Oil market fundamentals are very, very weak but that doesn't seem to be making much difference to the price and sentiment is being driven by other markets.
Stock markets bounced on Wednesday, reversing some of the previous session's losses. U.S. stock index futures were set to open nearly 1 percent higher on Wednesday with investors hoping macro-economic data would show the global economic may not be as severe as initially thought. <.N>
REUTERS DEAMND POLL
European shares were up by midday on Wednesday, recovering losses made in the previous session on stronger-than-expected earnings news.
Royal Dutch Shell
Speaking after the results, Shell Chief Financial Officer Peter Voser said oil prices were unlikely to rise significantly in the next 12-18 months because of economic weakness.
It will take time for the economy to recover, and hence the oil and gas price will be affected by that, Voser said.
Reuters' poll of 11 analysts, banks and industry groups forecast world oil demand would fall this year by much more than previously expected, as growth stalls in emerging powerhouses China and India and fuel consumption declines in the developed world.
Estimates see oil growth re-emerging in 2010, but analysts remain divided about how severe this year's demand contraction will be, as the global economic outlook remains clouded.
Reuters' poll showed oil use declining by an average of 1.56 million barrels per day (bpd) in 2009 to 84.10 million bpd.
Oil price slipped earlier after data on Tuesday showing U.S. crude stocks rose 4.6 million barrels in the week to April 24. The data from the American Petroleum Institute were more than double analysts' expectations for a 2.1 million-barrel increase.
The API report came ahead of the more authoritative U.S. Energy Information Administration, due at 1430 GMT. (Additional reporting by Fayen Wong in Perth; editing by William Hardy)